Select Committee on Health Minutes of Evidence

Examination of Witnesses (Questions 360 - 374)




  360. We may need to go to Australia to look at it.
  (Mr Weeks) We would be happy to accompany you and introduce you to the Australian Nursing Federation.

John Austin

  361. I think it has been suggested that the most attractive contracts for the private sector are those which have reducing costs over the years; and just going back on the question to Mr Rose as to what degree of flexibility you have got to reduce your overall costs over the years, if you do not have responsibility for staffing budgets within the contract?
  (Mr Rose) When we bid for a PFI contract which is, say, 30 years long, we get into the area of crystal ball gazing, because nobody knows what clinical services or, indeed, what hospital requirements and demographics will be five years from now, far less 30 years. We are, however, involved in the maintenance of the building and the general provision of services, which we believe will be there, and we have to make an educated guess as to what the future will be. Those services are market tested every five years, and every five years, therefore, the client and the contractor will sit down to look at what is being provided, what needs to be provided and to go out to the market to make sure that that price is the correct price. And, at that point, if the price is lower then we have the option to reduce the cost of the contract, or to walk away from the contract and let somebody else come in to do it. So there are very clear statements and procedures within PFI contracts to make sure that those costs are contained, and preferably reduced; a year-on-year improvement is what both the public and the private sector wish to go for, and we co-operate fully with the client in trying to bring this about.
  (Mr Weeks) Just to make one technical point on that. Unfortunately, the provision is not there within that market testing to reinvolve the public sector; that market testing is solely a choice about whether another contractor could come in and provide that service under the current guidance, which is an issue we have raised with the Department in the past. It may not always be practical, but we believe, in principle, there is no reason why, if you are going to have that subsequent market testing, a public sector provider could not bid to provide that service.

Julia Drown

  362. In your memorandum, Mr Rose, you wrote about bed numbers, which is an issue that has come up in this inquiry on many occasions, and it is not entirely clear, where you are saying that the decision is made on the number of beds in a new or improved hospital. So I wonder if you could clarify when that decision is made; is it made before you become involved in any discussions? And could you tell us whether any of your members have ever had to negotiate a reduction in the number of beds in order to make a scheme affordable?
  (Mr Rose) The decision on beds is made by the Trust, and solely by the Trust, before the outline business case comes out; we have no hand in it at all. When bids come in from the variety of companies, or consortia, who are asked to bid, if at that stage the Trust then decides that the cost is higher than the budget the Trust has, then the Trust itself may decide to look at reducing the number of beds; we have no role in this and we wish no role in it.


  363. Could I ask Mr Weeks, in relation to UNISON's concerns about bed numbers, has your analysis on this, I know that you have worked with academics who have looked at this, taken into account the kind of wider connection between the acute sector and community provision in any particular scheme?
  (Mr Weeks) We have, and what we have argued is that before the National Beds Inquiry, in order to afford their schemes, the public sector planners, we do not blame the private sector providers for this, it is the public sector planners—

  364. You are in the clear, Mr Rose.
  (Mr Rose) Yes, I welcome that.

  365. I am sure.
  (Mr Weeks) And on this issue, we are happy to say, we are not arguing that it is the private sector providers who are driving the agenda, we do say that what happened was the public sector planners planning these schemes went with various assumptions about what level of bed occupancy they needed, how much reprovision could be made in the community, and to what extent they could improve their throughput levels. They chose assumptions to deliver the scheme they could afford; in essence, that is our argument, on a PFI basis. Now they will obviously dispute that, we had considerable debate to and forth on this, in Durham, but that is the essence of our argument. Since the National Beds Inquiry has come out, we recognise that the guidance from the centre is now much better and much stronger, so the bed numbers issue for the current wave of PFI schemes is not one that we have been particularly critical of; there are a few exceptions, where in one or two places we still believe the Trust is being overambitious in terms of the number of acute beds. But if you look at what we have been saying about the current wave, and potentially the future wave, the bed numbers issue the Government has addressed; there is a cost to that, however, which some of the first wave Trusts and some of the ones that are planning are struggling with, to reafford the new assumptions. So that is the essence of our argument, not that the private sector was telling the NHS how many beds it should have, but, in order to get a PFI scheme within the rules that existed at the time, people were making overoptimistic assumptions about their ability to meet various clinical targets, and that was driven by the affordability issue, not by the bed modelling issue.

Julia Drown

  366. So PFI schemes are likely to become more affordable, are likely to come out better than the public sector comparator, if they are a smaller scheme?
  (Mr Weeks) All other things being equal, you would expect that to be the case.

  367. Why?
  (Mr Weeks) Sorry, I did not catch what you said.

  368. You are saying that before you get involved in the private sector bid a Trust has scaled down the number of beds they require, they must therefore be scaling down the number of beds they require in their public sector comparator and their private sector bid. So the only reason a Trust would do that would be to think that a private sector bid would be more likely to come out cheaper, better value for money, if it was a smaller scheme than a larger one?
  (Mr Weeks) They believe that the private sector is going to provide them with the capital they need for a new facility. In most cases, they are working on the assumption that public sector capital is not actually available. Our criticism of the public sector comparator is, it is not really a comparator, and because of the way it is structured it is a test after the event of some of the assumptions you have been making, not really a genuine alternative. What we would want to see is a properly costed, alternative scheme, which could be financed by public sector capital, if that public sector capital was allocated. The public sector comparator is a test on your assumptions about PFI.

Siobhain McDonagh

  369. So why is it then that hospitals in my own area, which are not PFI, which are not being built, have all reduced their bed numbers, and have all the same problems of bed-blocking that PFI hospitals have?
  (Mr Weeks) I cannot comment on the individual hospitals in your area. What I would say is, the degree of bed reduction in the publicly-financed hospitals is significantly lower than those that went forward as PFI hospitals. We are not saying that the number of beds that existed in these hospitals should always be maintained for ever, obviously the NHS is reproviding care in different settings and it is advancing in technology. So we are not disputing that some bed reduction was inevitable.

  Dr Taylor: Long before PFI was ever thought of, National Health Service acute beds were going down, they went down steadily until round about 1996, then they levelled out. So that was long before PFI came in. And it is the National Beds Inquiry that has proved that the reduction has gone too low, and that has been too late for the places that concern me, where the PFIs were too small; and now, in Worcestershire specifically, they are at last admitting that and saying they have got to find an extra 90 beds.

  Chairman: If you want any more detail on this, he has got the Adjournment tonight, so . . . But, Siobhain, I interrupted you.

  Siobhain McDonagh: But the point we are making, and, Mr Weeks, I would challenge some of the things you said earlier, because when we went to the hospitals last week, some of your members were saying, or I understood them to be saying, it was directly PFI and the private sector that led to the number of reducing beds, and we had hours of discussion about it. And the point I am trying to make is that I believe, personally, that the fact that the beds have reduced is because of all the assumptions that were made that we now know to be wrong.

Julia Drown

  370. Can I just pick that up, because you said there, by comparing the number of beds in public sector schemes that have gone ahead with PFI schemes, you are admitting some public sector schemes which have gone ahead, which suggests the public sector comparator is not some imaginary thing, it is something that in some cases has been delivered in the country?
  (Mr Weeks) In a very, very small number of cases, only five schemes out of 38, in fact.

  371. Sure, and the only ones that had a real public sector comparator; they did something completely different, you are saying, from all other schemes?
  (Mr Weeks) In three of those cases, there were very special factors that meant PFI was judged not to be viable by the Regional Office. So actually it was not the public sector comparator that influenced the choice. In the Guys scheme, for example, there was a decision taken, for various reasons, that they should not go ahead with that, and in other schemes it was felt that the PFI market was swamped out. We do not believe that the fact that a handful, relatively speaking, of public sector schemes have been approved, which we welcome, proves that the public sector comparator is working properly. We would also point out that the claimed savings under the public sector comparator for the PFI as a whole have now fallen to 1.75 per cent, according to ministerial statements. Given the level of indeterminacy in the assumptions you make in the public sector comparator, we think a claimed saving of 1.75 per cent does question the whole way the public sector comparator is being used, and that is one of the issues we would like our review to look at.

  Dr Taylor: In Worcestershire, we believe that the number of beds was determined by the amount of money that was available, they decided how much money they had got to pay, either for the public or the PFI, and then worked out the bed numbers from that, and it worked out far too low.

  Julia Drown: So again it was not the PFI, it was decided before.

  Dr Taylor: It was the amount of money they had and then they put it to both. And where I would argue which is why we want an independent, unbiased adviser; you can see people arguing, the unions one side, other people the other side, that the public sector comparator could be made almost what you want it to be made. And this is where we want some really simple person from the National Audit Office—

  Chairman: Don't look at me. Sorry.

  Dr Taylor: Someone who can really explain it to all of us who are not accountants, so we would really get to the bottom of it.

  John Austin: Just a quick one on that. If I can look at my own area's experience, and the dramatic cut in beds, obviously, when a new hospital was being built, and a new scheme, it was easy to argue that all the systems would be in place which would allow the quicker throughput, and etc., etc.

  Dr Taylor: Like the intermediate care beds that should be there.

John Austin

  372. But the point I would make is that, whether the new hospitals have been built by conventional finance or PFI, there are not enough beds, but is it going to be more difficult to increase the number of beds where the hospital is a PFI one than if it were not?
  (Mr Weeks) I would argue, not so much more difficult but you may get into discussions about additional cost, because understandably the private sector provider will say, and, I will be fair to them, it is legitimate for them to say this, "we agreed to provide what the public authority said they wanted at the time, and if the public sector authority was not sufficiently sharp enough to say that they wanted variations for no extra cost then they have to bear the cost of that." And so I think that is the problem, that those schemes will have to bear an extra cost.

  John Austin: I think Mr Rose was nodding his head as well.


  373. I think there is agreement along the table, which is the first time we have achieved that today, I think.
  (Mr Rose) Definitely, Chairman, as it would be if it was publicly funded, there would be a cost, and there would have to be negotiations on what the cost was. I think, Chairman, if there is one thing that you could do, which I think we would all agree needs to be looked at, it is to recommend that public sector comparators become real comparators. There is not one that I am aware of so far which has really understood what the future provision of a hospital would cost, because, yes, there is a budget which the Trust has and it works within it, but also the figures have to be based, in general, on historic costs, to show how the hospital has been treated in the past. And since we know there is a woeful lack of maintenance over the last 20 to 30 years in the public sector, it is difficult then to put in a full maintenance figure, or else the Trust publicly is admitting it has not maintained the estate properly.

Julia Drown

  374. So you are saying that the public sector comparator was made too cheap; so what UNISON are saying then?
  (Mr Rose) We are saying it has to be more realistic, and work is going on within Government to do that. And against that realism it may well be that better deals come through.

  Chairman: If there are no further questions, can I thank our witnesses for an excellent session. We are very grateful to all of you for co-operating with our inquiry. You have, I think, all of you, indicated you may follow up with some written material; we appreciate that. Thank you very much.

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